China's Monetary Policy Under Half Open Conditions And Its Impacts On The Stock Market

This paper forwards an open economy, two-country model, in which the stock markets in those two countries are connected through the international trade channel, under the assumption that the tradable goods are endowed and the non-tradable goods are produced by inhabitants. We get the equilibrium solutions of the model with and without transport costs. We also discuss the effects of the demand shock, the supply shock and the relative sizes of countries on economy situations. The latter part of the paper introduces the brief histories of China's and several developed countries' monetary policies. By contrast of them, we elucidate the reasons of the obvious correlation which exists between China's monetary policy and America's monetary policy. This paper also discusses the impacts of two countries' monetary polices on the stock markets.